Budgeting Money

Why you Need a Budget

" People easily come to a point where they buy on impulse without thinking of the consequences..."

Many people don’t budget because they don’t see the value in it. Other people simply have no desire to budget, because they don’t want to spend time on it. The problem is, the result often is bankruptcy for people who cannot control their spending. They say that bankruptcies have reached an all time high and are on the rise year by year. People have come to a point where they easily buy on impulse with no thought of the consequences. This is especially so if they are using a credit card, or two or three credit cards.

Reverse the Trend
In order to reverse this trend, people must become more responsible with their spending. One of the best tools to help someone accomplish this is a personal budget drafted up and kept to. A budget is a personal financial plan which sets limits on the amount of money you can spend on anything over a particular period. The budget can be set out for a three month period, broken up into weeks. This gives you a full indication on what you can spend on what items over each week.

Most people have no idea where and how they spend their money. How often have you taken money out of the ATM machine, only to realise a couple of days later that it has gone from your wallet. Then you wonder where it went. It is hard to remember exactly how you spent it. Most times the money has been wasted on frivolous purchases, just because the cash was in your wallet.

Having a Budget Means you Account
Having a budget helps prevent this happening by making you accountable for the money you spend. A good budget will show you how much you can actually afford to pay for various consumer items. Whether it is a car or a new DVD player or a new pair of shoes. A budget determines whether or not that purchase was accounted for and whether it fits in with your monetary spending levels. Your plan will act as a reminder if you are getting in "over your head" financially.

Sticking to a Budget is the Key
Remember, simply creating a budget isn’t enough. In fact, creating a budget is very easy. Sticking to it and having the discipline to be firm with yourself, is the difficult part. If you are used to spending your money freely, it will take some time before you can slot into the discipline of your budget.
However, if you stay with it, the long term benefits will be financial freedom and living debt free.

What is a Cash Budget Plan?
The cash budget plan is part of the overall financial plan. It's purpose is to ensure that you have sufficient every month as a surplus to meet your needs. Many people are knee deep in debt and heading fast towards financial disaster. Debt is the biggest curse to any financial plan and it is the greatest obstacle that anyone has towards financial freedom.

A cash budget plan is the only way to ensure that you can take back control of your finances and proceed towards creating wealth for yourself.

Purpose of a Cash Budget Plan
The purpose of a cash budget plan is to provide information that will enable you to see where you are at and help you make decisions.

Some of this information includes:

  • How much money in income is available for spending.

  • How much money you need to meet your fixed expenses such as your rent, mortgage, power, food, telephone etc. These are expenses that have to be paid regardless of whether you want to or not.

  • How much money you have available for discretionary spending such as for entertainment and eating out etc.

  • How much you need to put aside for other expenses that come up either quarterly or monthly such as insurance, hire purchase payments, car loans etc.

  • How much money you need to save on a regular basis in order to plan for a future goal such as a holiday or buying a new boat etc.

Your budget will only provide information from which you can make decisions. It won’t necessarily lock you into anything, but if you learn to abide by it, it will be a help to you rather than you being a slave to it.